The Internal Revenue Service (IRS), the Department of Labor
(DOL) and the Department of Health and Human Services (HHS) recently issued
guidance (IRS Notice 2012-17; DOL Technical Release 2012-1) in the form of
frequently asked questions (FAQ) about various issues related to the Patient
Protection and Affordable Care Act (PPACA) employer mandate, waiting period
limitation and auto-enrollment requirement. Below, we discuss several questions
we have received about these PPACA provisions.
When will employers be required to implement the PPACA
PPACA added section 18A to the Fair Labor Standards Act
(FLSA), which requires employers with 200 or more full-time employees to
automatically enroll new full-time employees in one of the employer’s health
plans and to continue the enrollment of current employees. Agency FAQ guidance
issued in 2010 stated that employers would not be required to comply with the
requirement before DOL regulations became applicable. The recent FAQ guidance
states that the DOL has concluded that its regulations will not be ready to
take effect by 2014, as previously projected, and until regulations are issued,
employers will not be required to comply with the auto-enrollment requirement.
Furthermore, it states that the DOL is working to coordinate the guidance with
the employer mandate and waiting period guidance.
Could an employer be subject to an employer mandate penalty
for not offering health coverage to an employee during a 90-day waiting period?
The new FAQ guidance indicates that future U.S. Treasury
Department and IRS-proposed regulations will address coordination of the
employer mandate and waiting period limitation rules; it is expected to provide
that an employer will not be subject to an employer mandate penalty for failing
to offer coverage to an employee during the first three months after his date
Are the agencies planning to permit employers to use
lookback and stability periods to identify full-time employees for purposes of
the employer mandate?
The recent FAQ states that the Treasury and IRS intend to
issue proposed regulations or other guidance that would allow employers to use
“lookback periods” and “stability periods” of up to 12 months, for purposes of
determining full-time status of current employees, as previously described in
Will the PPACA 90-day limitation on waiting periods
effectively require employers to offer coverage to part-time employees after
they have worked 90 days?
The recent FAQ states that the waiting period limitation
does not require employers to offer coverage to part-time or any other
classification of employees (indeed, employers may exclude part-timers or other
classifications of employees from coverage entirely). Instead, the PPACA
waiting period limitation merely prohibits requiring “otherwise eligible”
employees to wait more than 90 days before coverage is effective.